Authors: Capital Markets Law Department, Att. Mustafa Şahin

Introduction

In publicly-held joint-stock companies, the share transfer regime is no longer limited to the on-exchange trading of listed shares. Rather, it has evolved into a multilayered structure encompassing dematerialisation, record-keeping within the Central Registry Agency (“MKK”), off-exchange transfers, and the conversion of non-exchange-traded shares into exchange-traded status. This article examines, in a holistic manner, the mechanisms for both on-exchange and off-exchange transfers, the conversion of non-exchange-traded shares into exchange-traded form, and the obligation to prepare a share sale information form triggered upon the crossing of certain thresholds in the issuer’s share capital.

I. Dematerialisation Regime and the MKK Record-Keeping System

Pursuant to Article 13 of the Capital Markets Law No. 6362 (“CML”), capital markets instruments must be issued in dematerialised form and monitored electronically by MKK, without being represented by physical certificates. In this regard, the Communiqué on the Procedures and Principles Regarding the Book-Entry Recording of Dematerialised Capital Market Instruments (II-13.1) (“Dematerialisation Communiqué”) sets out in detail how records relating to dematerialised instruments and the rights attached thereto are to be maintained within the MKK system. Under Article 5 of the Communiqué, all records concerning dematerialised instruments are held electronically by MKK through its members, in accordance with the instructions of the right holders; the date on which the records are entered into the MKK system is determinative for asserting such rights against third parties.

Since the dematerialisation of shares is mandatory for publicly-held companies whose shares are traded on the stock exchange, these shares have largely moved away from physical form and have become dematerialised capital markets instruments monitored through MKK. Consequently, the legal implications of share transfers must be assessed primarily through “record changes”; irrespective of whether the transaction occurs on the exchange or off the exchange, the transfer of ownership and of rights attached to the shares is ultimately completed through MKK’s record entries.

II. Off-Exchange Transfer of Exchange-Traded Shares

In the context of exchange-traded shares, buyers and sellers do not transact directly with one another; instead, they meet through intermediary institutions authorised to conduct trading activities. Following the matching of orders on Borsa İstanbul, clearing and settlement are carried out through Takasbank and MKK. The contractual relationship is established when the investor submits a buy or sell order (exchange order) to the intermediary institution, while the transfer of ownership and shareholding rights is completed through the settlement entries made in the investor’s MKK accounts.

Nonetheless, there is no requirement that dematerialised shares must always be transferred on the exchange. Both Article 497 of the Turkish Commercial Code (“TCC”) and the Dematerialisation Communiqué explicitly allow the off-exchange transfer of dematerialised shares that are traded on the exchange. Articles 16(4) and 16(7) of the Communiqué require intermediary institutions to notify MKK of the quantity of shares sold off-exchange and the account details designated by the buyer no later than the business day following the sale; Article 17(4) further provides that book-entry changes arising from off-exchange buy-sell transactions are to be executed by the MKK member to which the relevant account is linked.

Since exchange-traded dematerialised shares are no longer represented by physical certificates capable of endorsement, an off-exchange transfer must be documented through a written assignment agreement compliant with the provisions on assignment of receivables under the Turkish Code of Obligations (Articles 183 et seq.). Ownership transfer under capital markets law is finalised upon the corresponding book-entry transfer (virman) within the MKK system.

With respect to off-exchange acquisition of exchange-listed registered shares, Article 497 of the TCC introduces a specific distinction: where shares are acquired on the exchange, all economic and management rights attached to the shares transfer to the purchaser automatically upon acquisition; however, in off-exchange acquisitions, such rights transfer only upon the purchaser’s application to the company for recognition as a shareholder. Importantly, unlike unlisted registered shares, the company’s refusal to recognise the transfer does not prevent the transfer of ownership; it merely postpones the exercise of participation and voting rights until the purchaser is recorded in the share ledger as a shareholder.

III. Conversion of Non-Exchange-Traded Shares into Exchange-Traded Status

In publicly-held companies whose shares are not traded on Borsa İstanbul, or in cases where certain share classes of the same issuer are non-exchange-traded, conversion into exchange-traded status constitutes a significant option. Article 15 of the Communiqué on Shares (VII-128.1) (“Share Communiqué”) provides that the non-exchange-traded shares of an issuer whose other shares are traded on the exchange may be converted into exchange-traded status upon the shareholder’s application to MKK through an authorised intermediary institution and payment of the applicable Capital Markets Board (“CMB”) fee.

This conversion process has two principal consequences. First, the shares are migrated within the dematerialised system to the “exchange-traded” sub-category. MKK is required to publicly disclose, on a daily basis through the Public Disclosure Platform (“KAP”), the nominal value and the identities or titles of persons applying for the conversion, and to report such information to the CMB monthly. Unless otherwise instructed by the CMB, these shares may be sold on the exchange two business days after MKK’s disclosure.

Although the conversion does not constitute a public offering, it effectively functions as a “market access” mechanism by increasing transparency in the shareholder structure, enhancing liquidity, and expanding the potential investor base. This makes careful legal planning essential, particularly with respect to control relationships, shareholders’ agreements, and the treatment of privileged (imtiyazlı) shares, which may require amendments to the articles of association before conversion.

IV. Share Sale Information Form Requirement for Major Shareholder Disposals

In issuers whose shares are traded on Borsa İstanbul, not only the dematerialised nature of the shares and the technical transfer mechanism are relevant, but also the protection of investors in cases of significant shareholder disposals. Pursuant to Article 27 of the Share Communiqué and the CMB’s Principle Decision dated 14 February 2023 and numbered 9/178, shareholders holding, alone or together with persons acting in concert, at least 20% of the issued share capital, or shareholders holding privileged shares granting the right to elect or nominate at least one member of the board of directors, must prepare a share sale information form and submit it to the CMB for approval if their aggregate on-exchange sales exceed 3% of the issuer’s share capital within any twelve-month period.

The Principle Decision introduces an additional cumulative threshold: where total disposals by such shareholders within the preceding twelve months exceed 10% of the share capital, a share sale information form must be prepared and approved by the CMB even if the new sale falls below the 3% threshold. This ensures that substantial changes in shareholding—whether executed through a single large sale or multiple small sales—do not escape regulatory oversight.

These requirements give concrete meaning to the concept of a “controlling shareholder” from a capital markets perspective. In assessing any proposed sale, the shareholder’s direct ownership ratio, the existence of privileged shares, and cumulative twelve-month disposal levels must be evaluated collectively. Failure to comply with these requirements may expose shareholders to administrative sanctions and raise concerns regarding inadequate disclosure to the market. Notably, the obligation to prepare a share sale information form also applies where non-exchange-traded shares are converted into exchange-traded form for the purpose of sale; therefore, the conversion strategy and subsequent sale plan must be designed together.

Conclusion

Today, share transfers in publicly-held joint-stock companies constitute a complex field extending far beyond the traditional concept of endorsement and delivery of share certificates. The interaction of the dematerialised system, MKK records, the specific rules under Article 497 of the TCC, and the combined operation of the Dematerialisation Communiqué and the Share Communiqué necessitates a comprehensive and integrated analysis. While off-exchange transfers of listed shares may be executed through written assignment agreements and book-entry transfers in the MKK system, recognition requests and share ledger entries continue to play a critical role for off-exchange acquisitions of registered shares.

Meanwhile, the conversion of non-exchange-traded shares into exchange-traded status—though not constituting a public offering—provides a mechanism for enhanced liquidity but requires advance planning, particularly concerning privileged share structures, amendments to the articles of association, and the sale strategies of major shareholders in light of Article 27 of the Share Communiqué and the relevant Principle Decision. Addressing on-exchange transfer mechanisms, off-exchange transfers, and the conversion process within a single, coherent “share transfer strategy” will enhance legal certainty and market confidence for issuers, controlling shareholders, and investors alike.

In particular, in transactions where public disclosure obligations, the share sale information form regime, MKK and KAP processes, and amendments to the articles of association intersect, share transfers should not be viewed merely as private-law transactions; the shaping role of capital markets regulation must be taken into account at every stage.